Friday 17 December, 2004
Depending on where you are, something less than eight shopping days remain between now and Christmas, a fact dwelling on many readers' minds as reflected by the fact that traffic to the website was higher last Friday (with the featured article offering a dozen suggested Christmas gifts) than on any previous day, ever.
I cheated a bit in that article and included a couple of items just recently received and not yet given a full detailed review. One in particular seemed at first a strange and irrelevant item. Fortunately, I allowed myself to be persuaded to have a closer look at it, and now I'm a convert (thanks, Steve!). Here's its review :
This Week's Column : SteriPEN Water Purifier : This space age device uses UV light to purify water. Great for the hiker/camper, and also for the international traveler. Use it to quickly and conveniently purify water wherever you go - in hotels, even drinking water in restaurants, and keep it at home for emergencies (along with your duct tape and plastic sheeting!).
Quick reader survey : Please click on whichever link best describes you - the link will send me an empty email with the answer as its subject line. I'll share the results next week.
Dinosaur watching : United says it will lose $725 million in 2005 unless it gets further reductions in its labor costs, and risks being wound up in a Chapter 7 close-down. In a bankruptcy court filing, the company said
Let's examine this statement for a minute, and reflect on the incredibly ineffectual management that issued it. United Airlines, a company that turned over almost $14 billion in 2003, is saying that its entire company future rests on a reducing a single cost item - labor - that is a mere 5% of total turnover. By implication, United is also saying it is completely unable to think up any ways to, for example, increase its revenue by 5% to cover its labor costs, to generate more efficient work practices, or in any other way to resolve this business challenge.
In other United news, the airline asked its bankruptcy judge to disallow negotiations from a group of its creditors, claiming this represented illegal collusion between the creditors, a violation of anti-trust law. After securing a temporary restraining order, a full hearing will be held today (17th).
But United and its dinosaur compatriots should be careful - getting what they ask for might be a double edged sword. Debt rating agency Standard & Poors said that virtually all airline aircraft-secured debt could be downgraded if United wins its case. A United win would also make it harder for airlines to finance planes because investors would be less willing to buy aircraft-backed debt, and would seek higher interest rates to reflect the larger perceived risk.
Might it not be easier - and fairer - for United to simply honor the terms of its current obligations to its creditors?
United is continuing to evolve, and has announced a further series of cuts to its domestic services, with simultaneous increases in international services. Domestic services will reduce by another 14% after the Christmas/New Year holiday period, and after adjusting for increased international services, overall capacity will be down by 3%.
Is this a taste of United's new strategy? To simply abandon routes whenever strong competition appears?
US Airways' newest deadline is 14 January. One of its financial advisors told the bankruptcy court that US' largest creditor, GE Capital, could repossess nearly 200 of the airline's 280 planes on January 14 if the airline fails to achieve all of its labor savings by then. GE Capital has apparently required the airline raise its cost cutting requirements from labor to almost $1 billion, up from the $800 million the airline requested initially. The bankruptcy court judge is deciding whether to allow US Airways to walk away from its current labor contracts.
There is, however, little or no chance that GE Capital actually would repossess 200 planes on 14 January. This is largely posturing for the benefit of the judge - I wonder if he will fall for it?
I wrote before about America West now selling prepaid gift cards, and suggested that travel agencies should get contracts to sell them as a new way of earning commission on travel sales. Whether or not any agencies have done this, other companies have been quick to respond, including Winn-Dixie, Rite-Aid, Staples, and now 7-Eleven, too.
Another way of paying for airline tickets has been quietly implemented by Continental Airlines, but this is a development that threatens us all. CO is offering a 5% discount on a future flight to passengers who pay for their bookings with cash or direct transfer of funds out of a checking account.
Remember when the airlines would first offer a discount if you booked a ticket online? Now you pay full price if booking online, and pay up to $50 more if you book in person. Care to guess how CO's 5% discount for not using a credit card will evolve? Sure looks to me like the first step towards charging extra if you want to use a credit card.
Not only do you usually get frequent flier miles or some other benefit when paying for tickets (or anything else) by credit card, you also get the convenience of buying now and paying when your statement arrives up to six weeks later, and you also get some degree of consumer protection if the airline stops flying or if something else goes very wrong. You lose all these things if paying by cash or direct funds transfer.
Several readers expressed doubt when I said, last week, that some people believed the Air France Concorde crash had a more complex origin than has been made public. Since that time the French accident enquiry, after a four year investigation, has now exonerated Air France from any responsibility for the crash, and seems instead to be focusing its blame on Continental Airlines. Amazingly, although the enquiry has exonerated Air France, the airline chose to pay $120 million to the relatives of those killed in the crash. Why would any airline voluntarily spend $120 million on compensation if it didn't feel it had at least some share of the blame?
And why did I say the plane may not have been properly loaded and may not have been properly piloted? Here's a rather technical but very detailed article from Aviation International News that explains why.
So why do the French think Continental is to blame (other than by virtue of being an American company)? Continental had improperly affixed the wrong type of metal strip to one of its planes. This fell off - probably due to being the wrong part and poorly mounted - and when the Concorde tires ran over it, caused them to be punctured. Tire fragments then flew up into the wing fuel tanks, and the rest is history.
Continental is probably not as blameless as they claim to be in this whole sorry circumstance, but did not the airport have a duty to keep its runway free of dangerous debris? And was not a tire shredding a reasonably foreseeable event that the Concorde designer/manufacturer should have planned for? How about the tire manufacturer, too? And are any of the issues raised in the article above of any validity?
Let's not make CO the only scapegoat. It is regrettable that the French investigating judge not only completely exonerates Air France but also goes through the grandstanding motions of summoning CO's CEO Gordon Bethune to answer questions. The chance of Mr Bethune having any personal knowledge of what happened would seem slim to nil. It might make for good anti-US headlines, but does little to advance an understanding of and solution for the tragedy that occurred.
They say there's no such thing as bad publicity. And so self-publicist extraordinaire Sir Richard Branson was almost certainly unworried by getting in what Britain's Guardian newspaper describes as a 'furious row' with aviation officials in Australia last week.
When Virgin's first flight from London landed in Sydney, Sir Richard was expected to exit the plane onto the tarmac and make a short speech as part of the maiden flight celebrations. Instead, he - ooops - stepped out onto the plane's wing, accompanied by two bikini-clad models.
Aviation officials were reportedly worried about the number of people on the potentially slippery wing, and tried to order Sir Richard back into the plane, and later gave a major dressing down to the airline for ignoring safety protocols.
More incredible deals in Europe. Discount carrier Ryanair is currently selling international tickets for £5 each way (about $9.50). This is a good deal, but what makes it extraordinary is that the £5 cost includes all taxes. Taxes are almost always considerably more than £5 each way which means that Ryanair is 'selling' these tickets at an immediate up-front loss.
As reader Mark in London puts it, 'round-trip for a tenner is remarkable stuff - you can eat a pizza cheaper in Italy than in London, with the flight thrown in'.
Amazingly, Ryanair is strongly profitable.
This year's 'holiday season' is expected to see record travel numbers. The AAA estimates 63 million people will travel more than 50 miles from home during the Christmas/New Year period, an increase of 3% from last year. 50.9 million will drive, 8.6 million will fly, and 3.2 million will go by train, bus or another way (what other ways are there, I wonder?).
Gasoline prices average $1.84 a gallon, 37c more than last year. Holiday airfares are down 6%, hotels down 1.4% and but rental car rates are up 2.3%.
Gas prices might be down, but not when you pay a rental car company for refilling its car's tank. Now described as a 'gas and service fee', this can reach $6/gallon in the US. Bob Bestor, in his latest issue of Gemutlichkeit, reports on gas costs of $15.50 a gallon with European rental cars, and gives a string of valuable suggestions on how to manage your rental car costs on the Continent.
I mentioned back on 26 November that the US government is spending $560 million a year to subsidize the cost of airline insurance premiums. But what does a foreign airline do when its government isn't similarly generous? Well, in Aeroflot's case, it simply cancelled coverages related to the hostile use of chemical , biological and radioactive materials as well as electromagnetic impulse devices (and possibly other risks too) from its next year insurance policy. Their Director of Risk Management and Insurance justified the move as saving passengers money due to the insurance costs avoided otherwise flowing through to ticket prices.
How this might effect its hoped for acceptance into the Skyteam alliance, its code share flights with US carriers, and what this might do to its ability to fly passengers to/from the US, remains to be seen.
Ever since Boeing first hinted at its more fuel efficient 7E7, I've been disputing their implication that the new plane would give them an unassailable lead in the vital mid-sized plane marketplace.
Two things have always seemed very obvious - firstly, the largest part of the fuel efficiencies are due to new generate engine technology, engines that can be just as easily be mounted under an Airbus wing as under a Boeing wing. Secondly, the small design advances in the airplane hull and wings are just that - small advances, and easily duplicated by Airbus.
After a lengthy gestation, Boeing finally made the 7E7 available for sale earlier this year, and confidently predicted it would have 200 firm orders on its book by the end of the year. With exactly two weeks to go, Boeing currently has only 52 orders - 50 from ANA and 2 from Air New Zealand. And it now has a big problem, too.
Airbus announced, last Friday, that is was proceeding to develop a new plane, the A350, to counter the 7E7. The A350 will have generally similar characteristics to the 7E7, and is an evolution of the A330 design. It is expected to enter commercial service in the first half of 2010, about two years after the 7E7 flies operationally. It will have lighter redesigned wings with greater use of carbon fiber materials and improved aerodynamics, plus, of course, similar engine technology to that being developed for the 7E7.
Airbus hopes to get about 50 orders for the A350 by next June. Meanwhile, ANA and Air NZ are perhaps feeling the first twinges of buyer's regret. They are both Star Alliance members, and the alliance announced over the weekend that it will be making a full evaluation and comparison between both planes before recommending which should be the preferred aircraft for its members.
Remarkably, Boeing said in this detailed article that they are pleased with the Airbus announcement; Boeing hopes it will become easier to sell 7E7s now that Airbus has revealed details of its competing product, enabling airlines to make a choice.
Boeing predicts that the market for mid-sized jets will be worth $400 billion over the next 20 years.
Now that Boeing and Airbus are developing very similar mid-sized jets, the key point of difference between the companies is their big plane solution. Airbus has the A380. Boeing has the much smaller 777, and has just about given up on selling any more 747s for passenger use. Boeing says there is no need for a huge plane the size of the A380 (which can carry 555 or more passengers) and hopes all the demand will be for mid-sized jets. Airbus says there will be a strong demand for the massive A380.
Who will prove to be most correct is currently unclear. But a new report this week would seem to suggest that, yet again, Airbus has chosen wisely and Boeing poorly. This report predicts that, assuming continued annual air travel growth of 4.3% a year, and allowing for a 60% increase in airport capacity between now and 2025 (don't ask how this will happen!), there will still be 3 million more flights each year, within Europe alone, than the airports will be able to handle.
Three quarters of all European airports have no possibility of adding new runways in the next 20 years, and ground facility expansion is also limited due to lack of space, environmental concerns, and other constraints. The top 20 European airports are already operating at full capacity 8 - 10 hours every day.
There's one obvious solution. Fewer flights with bigger planes. Planes like the A380.
The FCC is looking at liberalizing the restrictions on cell phone use in flight. Although this was only announced on Wednesday, by the end of Thursday they had already received 1500 emails from members of the public, most of whom are against allowing cell phone use because they don't want to be surrounded by people having noisy phone calls.
Both the FCC and FAA would have to agree on how cell phone usage would be managed on board planes, and they don't expect any new regulations to be promulgated in less than two years.
The odd couple : Third largest wireless carrier Sprint announced it was buying fifth largest carrier Nextel on Wednesday. The usual statements about synergy and economies of scale and whatever else were offered by executives of both companies, but the reality is the two networks use totally different and incompatible techologies.
A cell phone that works with Sprint's CDMA network can not work on Nextel's iDEN network, and vice versa, and, in general, neither type of phone is any good outside the US, either. They plan to offer dual mode phones, but not until 2006, which is a lifetime in terms of cell phone contracts and renewals. Relying on special custom-built phones will limit their customers to a small choice of phone handsets, typically less technically advanced and almost certainly more expensive than the standard GSM handsets offered by Cingular and T-mobile.
New market sizes of the major cell phone companies :
1. Cingular (recently having gobbled up AT&T) : 46 million
This Week's Security Horror Story : The plastic explosive the French lost during an airport security training exercise remains lost, and may now never be found. Only slightly better news from Newark : A dummy bomb - a device mocked up to look like a bomb, and about as obviously bomb-like as possible (it was even complete with a detonator, wires, and a time clock) was detected during baggage screening. But - oops - the screeners then somehow 'lost track of the bag' which was duly loaded on to a flight, and not retrieved until the plane landed in Amsterdam eight hours later.
Last summer a report in Newark's Star-Ledger suggested that the TSA were missing one in four test explosives and weapons. Perhaps we now need to ask for a second statistic - how many of the 'detected' devices are actually then successfully apprehended before being loaded on to a plane and flown away?
And reader Tom points out we don't know, for sure, if the possible explosive sighted by the screener was the test dummy explosive. Maybe it was a real explosive device and the dummy test unit was overlooked. Because no-one ever matched the bag to the alert, we'll never know.
Clark Ervin was Inspector General for the Homeland Security Department. During his tenure he published a series of reports that were critical of the TSA and other aspects of Homeland Security. His reward for a job well done? He lost his job and is now out of work. Chances are his successor may not be so critical. Details here.
Unlike most countries, it is not possible for foreigners to fly, eg, from London to Los Angeles, change planes at LAX, and then fly directly on to, eg, Singapore. Everyone, even if they don't leave the secure part of the airport, must get a US visa. And that is not always an easy or pleasant requirement these days. However, every cloud has a silver lining, and Air Canada is now enjoying a boost in its international traffic, caused by a growing number of passengers choosing to travel via Toronto, Vancouver or Montreal rather than transit through the US.
The new US visa requirements have also benefited Canada in other ways. Several Canadian universities are seeking to attract foreign students and researchers who might otherwise have attended US institutions. Canada has also become a base for some offshore outsourcing companies to serve US customers without their employees needing to enter the US.
This doesn't make us safer. It just robs our airlines and airports of needed money. Meanwhile, our Mexican border remains wide open to any terrorist who wishes to walk across.
It doesn't pay to pretend to be Osama bin Laden. A candidate for the Darwin Awards, perhaps?
Another strong contender for a Darwin award must be the Australian who suffered unexpectedly when his 'beer drinking machine' proved to be too much for him to handle.
Thanks a lot, for not very much : The TSA will allow passengers to lower their arms after a screener has patted down their upper body. The change comes after hundreds of travelers have complained to the TSA that patdowns are humiliating and invasive.
Apparently the TSA thinks the patdowns will be less humiliating and invasive if you can stand with your arms at your sides for half of the procedure.
Have you noticed all the cameras that look down on you, in growing numbers, everywhere? Have you ever wondered what they see? Read on....
Lastly this week, an award for - well, you decide what - should go to the inventor of this unique method of transportation.
Until the next newsletter, please enjoy safe travels, and for the many Jewish readers, please have a wonderful Hanukkah from Monday.
David M Rowell aka The Travel Insider
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